Facing the Regulatory Music1 Nov, 2008 By: Thomas Haire Response
Leading legal and industry association experts discuss the current regulatory landscape in direct response marketing.
As 2008 comes to a close, it seems that, now more than ever, new regulatory and government affairs issues pop up on the horizon weekly — if not daily — for direct response marketers. Expanding marketing technology is just one reason for this, as growing expertise in Web marketing and the expansion of mobile marketing is catching the eyes of such groups as the Federal Trade Commission (FTC) and Federal Communications Commission (FCC).
At the same time, industry associations seem to be working closer than ever with government agencies to ensure that their businesses get a fair shake while, at the same time, building consensus on the best practices for direct response marketers. With issues like changes to CAN-SPAM laws, the digital television transition scheduled for February 2009 and new mobile marketing regulations under discussion, the time is ripe for open and honest discussion about the regulatory direction of the DR business.
Recently, Response visited Washington, D.C., to chat with some of the leading voices in this area. From Linda Woolley, the recently-appointed Direct Marketing Association (DMA) executive vice president of government affairs, to Bill McClellan, the Electronic Retailing Association's (ERA) vice president of government affairs, to long-time industry legal experts Linda A. Goldstein of Manatt Phelps & Phillips and Jeffrey D. Knowles of Venable, this group of leaders provided some interesting and pointed answers to a number of questions.
What are the top three items on your dossier when it comes to the regulatory and government affairs issues that are facing the direct response marketing world?
Linda A. Goldstein, partner/chair of the advertising, marketing & media division, Manatt Phelps & Phillips LLP: The top issue that continues to face the DR world is an increasingly aggressive FTC, which continues to be vigilant in its oversight of this industry and aggressive in the remedies it seeks through enforcement action. In addition, the standards for substantiating health and safety claims, particularly in the dietary supplement area, continue to be quite stringent — with the FTC and others insisting upon double-blind clinical studies conducted on the product itself, rather than ingredient testing. A second issue is continued regulation of privacy and data security. Momentum is gaining for the passage of a national Do-Not-Mail list. The philosophical underpinning of such a list is not good for our industry, as it represents continued restriction on marketers' ability to reach out to consumers. Additionally, the requirements for maintaining security of collected data continue to remain a regulatory priority. I fear that many DR marketers believe that simply achieving PCI compliance is sufficient, and that is not the case. Finally, we are seeing increased focus on the DRTV industry and product claims by the state attorneys general, even in instances where the FTC is already conducting an investigation. In many respects, enforcement actions by state attorneys general can be just as debilitating for a company as an FTC investigation.
Jeffrey D. Knowles, partner, Venable LLP: First, impending changes to the FTC's Endorsements and Testimonials Guide could force enormous change on the way that direct marketers represent product performance. While current guidelines allow advertisers to use testimonials that are not generally representative of performance, so long as they are truthful, the new rules would shift the inquiry toward whether the advertiser can substantiate the testimonial as a typical result. The industry should be prepared to litigate if the FTC goes too far in this area. Among other things, this shift would raise substantial First Amendment issues in seeking to prohibit not just false or misleading messages, but truthful ones as well. Second, the FTC Reauthorization Act of 2008 could expand the FTC's authority to a significant degree. If passed into law, the proposed legislation would enable the FTC to seek civil penalties for violations of the Section 5 of the FTC Act for first-time offenders, expand its jurisdiction to non-profit organizations and telecommunications companies, and streamline the agency's rulemaking procedures. The proposed legislation would also increase the FTC's budget by 10 percent each year. Third, privacy and data security issues are heightened for direct response marketers as we adapt to the convergence of DRTV with Web-based and mobile marketing. Marketers are finding new ways to use customer information, both internally and externally, through various media and business models. Consumers have been nervous about identity theft and unauthorized charges for years, and any major incident will prompt renewed calls for more regulation.